What Did JPMorgan’s Dimon Say About the US Economy?

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We don’t typically focus on company-specific news on this website, but we can and do read such articles, sharing stories when we believe they highlight a broader theme. That’s the case today, when I found dueling headlines on one subject—a chance to highlight how accepting media conclusions could lead you to a very awkward place indeed.

The specific subject is the opinion of Jamie Dimon, JPMorganChase CEO, on the direction of the US economy. The media, frankly, seems a little confused about what he actually said. Several reports note Dimon is optimistic about future growth; others, however, claim that on a conference call with analysts following the release, Dimon struck a cautious tone about the US economy’s direction. Here is a quote from one such article:

On a call with analysts, Mr. Dimon and J.P. Morgan finance chief Marianne Lake fielded questions on whether the U.S. economy has more strong days ahead.

“It’s as good as it’s ever been,” Mr. Dimon said on the call. “Obviously it’s going to get a little bit worse.”

Mr. Dimon said he wasn’t ready to forecast a recession though, and that the economy “still looks okay.” He cited 2% to 2.5% growth for the last five years, roughly 5 million added jobs, and boosts in household formation, car sales and wages.

But he added that the market is adjusting to concerns about China’s economy and falls in commodity prices. “Hopefully this will all settle down and is not the beginning of something really bad,” he added.

With that, you might wonder how other media could reach the conclusion Dimon has a sanguine outlook. To iron out the discrepancy, let’s compare his commentary here the actual call transcript. Here is the exact question-and-answer addressing the US economy.

Glenn Paul Schorr

Evercore ISI

Fair enough. I just had one quick follow-up on Ken's last question. If two thirds of the economy is consumer-led, you look at all your early-stage delinquencies like you said, and Jamie to your comments, things look okay. I hate putting words in your mouth but what do you think the disconnect then is between what's going on in the markets versus what's going on in the trends in your business both in terms of growth and forward-looking credit looks?

James Dimon

Well the U.S. economy has been chugging along at 2% to 2.5% growth for the better part of five years now. The last two years has created 5 million jobs. And when you look at the actual household formation, car sales, wage, people working, it still looks okay. Corporate credit is quite good. Small business formation is not back to where was but it's quite good. Household formation is going up. So obviously market turmoil, we all look at it every day, but I'm not sure most 143 million Americans look at it that much who have jobs.

And you have a big change in the world out there. People are getting adjusted to China slowing down. When you have commodity price go down like that there are big winners and losers. The oil companies are losers, consumers there's a benefit. Brazil gets hurt. India benefits, South Korea benefits, Japan benefits. And those close kind of tripling words, and hopefully this will all settle down and it's not the beginning of something really bad.

Now, no major bank CEO is a perfect forecaster or economist, but above all else, it’s crucial to note there is no forecast there, positive or negative! There is only, and I mean only, a discussion of what already happened.

You’ll note that the part missing from our first quote is this: “‘It’s as good as it’s ever been,’ Mr. Dimon said on the call. ‘Obviously it’s going to get a little bit worse.’” What gives with that? Here is what gives. It wasn’t said in response to a question about the US economy, but rather, delinquency rates on JPMorgan’s books. Here it is in full context.

Kenneth Michael Usdin

Jefferies LLC

Okay. My second question, if I can ask an X energy credit question, a lot of concerns that we're going to get into some type of broader deterioration but what your numbers showed no signs of heading towards. What are you looking for? Are you seeing any signals of X energy changes in either delinquencies or watch trends and are you still comfortable with kind of that low fours type of charge-off expectation that you guys had talked about previously? Thanks.

Marianne Lake

Chief Financial Officer & Executive Vice President

So, energy, mining, we're watching very closely industries that could have knock on effects like industrial and transportation but we're not seeing anything broadly in our portfolio right now, we're just watching very closely which is why obviously you can take up reserve build number and you can say it's almost essentially all made up of oil and gas and metals and mining and behind the scenes we've had upgrades and downgrades of a number of other different companies across sectors but nothing particularly somatic yet but we're watching.

James Dimon

I was just going to add, the credit card, commercial bank, middle-market large corporate credit is as good as it's ever been so obviously it's going to get a little bit worse, I wouldn't call it a cycle per se, if you have a recession you'll see a normal cyclical increase in all the losses. We're not forecasting a recession, we think that the U.S. economy looks pretty good at this point.

The call was light on macro-economic commentary other than this. So, it seems Dimon is saying that if there was a recession, delinquency rates would rise. But he goes on to say they aren’t forecasting a recession, but rather, growth.

All this highlights the challenges presented to investors who draw investment ideas from media, even high-quality, mainstream, very reputable media. You cannot simply take ideas and impressions provided by media for granted. Fact-checking, adding in the context, stripping out opinion and forming your own conclusions are key.

All included transcript citations herein were sourced using FactSet’s CallStreet function.

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.

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